Hovnanian Has Wider Loss as Sales Demand for Homes Slows

March 5 (Bloomberg) -- Hovnanian Enterprises Inc., the
worst-performing U.S. homebuilder this year, reported a wider
loss for its fiscal first quarter as inclement weather extended
construction times and sales demand slowed.

The net loss for the three months ended Jan. 31 was $24.5
million, or 17 cents a share, compared with $11.3 million, or 8
cents, a year earlier, the Red Bank, New Jersey-based company
said today in a statement. The average estimate of nine analysts
was for a loss of 4 cents a share, according to data compiled by
Bloomberg.

Hovnanian, New Jersey’s largest homebuilder, said last
month that while revenue grew in the first quarter, a slower
sales pace, poor weather and labor and material shortages in
some markets hurt home deliveries, leading to a wider loss for a
quarter. Net contracts dropped to 1,202 homes from 1,344.

“The strong recovery trajectory from the spring selling
season of 2013 has softened on a year-over-year basis,” Chief
Executive Officer Ara Hovnanian said in today’s statement. “Net
contracts in the months of December, January and February have
not met our expectations.”

Hovnanian today slumped 10 percent, the most since December
2011, to close at $5.44. The shares have lost 18 percent this
year, the most in a Bloomberg index of 19 U.S. homebuilders.

Harsh Weather

Across the homebuilding industry, orders started to slow in
the second half of last year, partly because of rising mortgage
rates and prices. The industry has taken another hit in recent
months with the cold weather in much of the U.S., Robert Rulla,
an analyst at Fitch Ratings in Chicago, said in a phone
interview before Hovnanian reported its results.

“The harsh weather we’ve experienced had a bit of an
effect on net orders, particularly in the Northeast and
Midwest,” Rulla said. “What we’re hearing from homebuilders is
that order rates are fairly weak so far this year.”

U.S. housing starts dropped 16 percent in January from
December, the biggest decline in almost three years, according
to the Commerce Department. Contracts to purchase existing homes
rose less than forecast in January, climbing 0.1 percent after a
5.8 percent decline the previous month, according to the
National Association of Realtors.

Revenue Rises

Hovnanian’s first-quarter revenue increased to $364 million
from $358.2 million a year earlier, as the average price of
homes delivered jumped 10 percent to about $351,300. Home
deliveries slipped to 1,138 homes from 1,188 a year earlier.
Contract backlog, an indication of future sales, rose to 2,456
from 2,301 year earlier.

Hovnanian said it is seeking to boost sales during the
spring selling season with promotions such as a “Big Deal
Days” sales campaign during the month of March.

“We believe this is a temporary pause in the industry’s
recovery, and based on the level of housing starts across the
country, we continue to believe the homebuilding industry is
still in the early stages of recovery,” Ara Hovnanian said in
the statement.

Industrywide, contracts to buy U.S. new homes unexpectedly
climbed in January to the highest level in more than five years,
rising 9.6 percent to a 468,000 annualized pace, the Commerce
Department reported on Feb. 26. It was the biggest jump since
July 2008 and beat the highest estimate among the 82 economists
surveyed by Bloomberg.